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Obama’s Final Student Aid Budget

NAICU Washington Update

February 11, 2016

President Obama released the administration’s FY 2017 Budget Request on February 9, which for higher education, builds on the themes of access, success, affordability, and completion that have driven his higher education policy directions.

The president’s budget sticks to the discretionary spending caps established in the November bipartisan budget agreement, but gets creative with mandatory spending to propose additional increases and new programs in student aid.  Congress has indicated they do not intend to give the plan much consideration. Specific budget items include:

Student Aid Programs

  • Pell Grants: The budget proposes to continue the scheduled increase in the maximum grant for FY 2017, to $5,935, and to continue indexing the mandatory add-on to inflation, a provision which is currently set to expire in 2017. An additional $2 billion investment in the program is proposed to do two things: reinstate the “year-round” Pell provision for students working towards on-time completion; and provide an additional $300 for a “completion bonus” for students taking 15 credits per semester.  Additional proposed tweaks to the program include the reinstatement of Pell Grants for Prisoners for students who are eligible for release from incarceration; and the incorporation of Iraq and Afghanistan Service Grants into the Pell Grant program so that these grants are not subject to sequestration, and can be a predictable source of aid for veterans. 
  • Campus Based Aid: As in past budget requests, the administration proposes to level fund Supplemental Educational Opportunity Grants (SEOG) and Federal Work Study (FWS), but to apply a new distribution formula to update the programs.  Federal allocations to institutions would be redistributed to target institutions that enroll and graduate Pell students; have low tuition for their sector; and produce graduates who get jobs and can repay their loans.  Lending authority for Perkins Loans would also be made using this formula, but new mandatory funds would be available to provide $8.5 billion annually in loans, which would function like the Direct Loan Program.  Institutions would retain their flexibility in making awards in the Campus Based Aid programs. 
  • Other student aid programs: The budget requests level funding for GEAR UP at $322 million; graduate education at $29 million; and TRIO programs at $900 million.  Within the TRIO request, the budget proposes a $20 million set aside for a competitive grant program for existing grantees to evaluate new evidenced-based strategies for student support and success.

New programs

The education budget includes $140 billion in new mandatory funds (which means funding outside the spending caps) for programs across all sectors of education.  

For higher education, the budget includes the following new programs:

  • America’s College Promise (ACP): Also known as “Free Community College,” this program would provide $60 billion over 10 years for partnerships with states to make two years of community college free for eligible students.  To participate, states must invest more in higher education and training, and community colleges must strengthen their programs and student outcomes.  For participating students to remain eligible in the program, they must earn at least a 2.5 cumulative average and be on-track for on-time graduation.  

    The ACP has been proposed in the last two budgets, but this year includes a new element targeted at minority-serving institutions.  From the same funding amount, grants would be made to four-year Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs) to provide newly enrolled low-income students with two years of free or reduced tuition.  To participate, at least 35 percent of the enrollment at HBCUs and MSIs must be low-income students.  In addition, the institutions must implement innovations to increase completion rates, and have guaranteed transfer and admission articulation agreements with community colleges to serve transfer students.  Pell-eligible students would be eligible for free or reduced tuition. 
  • College Opportunity and Graduation Bonus: The budget requests $548 million, or $5.7 billion over 10 years, to reward colleges that enroll and graduate low-income students “on time”; have high graduation rates; and low default rates. Institutions would receive a grant based on the number of Pell Grant recipients who graduate multiplied by a tiered bonus based on institutional type. 
  • First in the World: This signature program of the Obama Administration funds competitive grants for innovation in higher education, but was given no funding in the final FY 2016 appropriations bill.  The budget requests $100 million, which is a $30 million increase over FY 2015 funding. 
  • Teacher and Principal Pathways: The budget proposes to eliminate the $43 million Teacher Quality Partnership program, and instead create a new $100 million program for competitive grants to institutions of higher education and non-profit organizations to prepare teachers and principals for high-need areas. 

Next Steps

This budget was delivered a week later than its target date, to a Congress that had dismissed it as irrelevant even before seeing the details.  Both House and Senate Budget Committee Chairmen said they would not be inviting the Office of Management and Budget (OMB) to formally present the president’s budget this year.  While not required, the OMB hearing has been a traditional step in the congressional budget process.

Technically, Congress does not need to pass a budget resolution this year, as the Bipartisan Budget Agreement of November 2015, set the spending caps for FY 2016 and FY 2017.  This should provide for a smooth appropriations process before the six-week summer break for party conventions. However, the Freedom Caucus is making noise about tamping down spending to FY 2013 sequester levels, which could disrupt regular order.  

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